A power purchase agreement (PPA) is a long-term contract between an electricity generator and a buyer, where the buyer commits to purchasing power from a specific renewable energy source – typically a wind farm or solar farm – at an agreed price for an agreed period. Think of it like a long-term deal between a farmer and a restaurant: the restaurant agrees to buy all the farm’s produce at a fixed price, giving the farmer certainty to invest and the restaurant predictable costs.
PPAs typically last between 10 and 20 years, though some shorter contracts (under five years) have appeared in the Irish market recently. The fixed pricing gives both sides stability – the generator knows its income, which helps secure financing for the project, and the buyer locks in a predictable electricity cost, shielding them from volatile wholesale energy markets.
🌿 Why PPAs Matter for Ireland
Ireland’s Climate Action Plan targets 80% renewable electricity by 2030, with a specific target that 15% of electricity demand should be delivered through corporate PPAs. This makes PPAs a key mechanism alongside the Renewable Electricity Support Scheme (RESS) – the government auction system that provides guaranteed prices for new renewable projects.
The logic is straightforward. Ireland needs massive investment in new wind and solar capacity to meet its targets. Developers need revenue certainty before banks will lend them the money to build. PPAs provide that certainty without requiring government subsidies – the corporate buyer effectively underwrites the project’s revenue, enabling construction to proceed.
PPA use has risen sharply in Ireland over the past few years, driven by energy price volatility following the 2022 energy crisis and an increasing corporate focus on decarbonisation. What was once the preserve of tech giants like Amazon, Microsoft and Google has expanded to include medical technology companies, drinks brands, distilleries and hospital groups. Flogas Enterprise, one of the leading PPA facilitators in Ireland, marked its 20th PPA since launching the service in 2022, with a portfolio accounting for more than 450 MW of installed capacity from wind, solar, hydro, landfill and anaerobic digestion sources.
🌿 Types of PPA in Ireland
Ireland’s electricity market has specific features that shape how PPAs are structured. The Single Electricity Market (SEM), which covers both the Republic and Northern Ireland, requires all generators to sell power through the wholesale market rather than directly to end users. This means Irish PPAs take particular forms:
🌿 Physical (Sleeved) PPAs
In a physical PPA, the buyer contracts with a renewable generator for a share of its output. The electricity enters the grid at the generator’s location and is notionally delivered to the buyer through the network by a licensed electricity supplier acting as intermediary. The supplier “sleeves” the transaction – facilitating the grid delivery, topping up supply if the generator’s output is below the buyer’s demand, and handling the market settlement.
Physical PPAs are the most common structure in Ireland. The buyer receives ownership of the renewable electrons when they enter the grid, along with the associated Guarantees of Origin (GoOs) – certificates proving the electricity came from a renewable source. This direct traceability is valuable for companies reporting on their Scope 2 emissions.
🌿 Financial (Virtual/Synthetic) PPAs
A financial PPA is essentially a contract for difference (CFD) between the generator and the corporate buyer. No physical electricity changes hands between them. Instead, both parties maintain separate arrangements for selling and buying power on the wholesale market, and a financial settlement occurs based on the difference between the agreed PPA price and the actual market price.
If the market price is above the PPA price, the generator pays the difference to the buyer. If it is below, the buyer pays the generator. The result is that both parties end up at the agreed fixed price regardless of market fluctuations. Financial PPAs are widely used internationally and are growing in Ireland, particularly for large corporates with sophisticated treasury operations.
🌿 Multi-Buyer (Aggregated) PPAs
Smaller businesses with lower energy consumption can struggle to meet the minimum volume needed to contract directly with a wind or solar farm. Multi-buyer PPAs solve this by bundling several smaller buyers together to reach the required scale. The intermediary aggregates demand from multiple companies and contracts with the generator on their collective behalf, giving access to renewable energy and pricing certainty that individual smaller businesses could not achieve alone.
🌿 How PPAs Support Additionality
One of the most important concepts in corporate renewable energy procurement is additionality – the idea that the company’s involvement directly caused new renewable capacity to be built that would not have existed otherwise. A PPA with a new wind farm that is only financially viable because of the guaranteed revenue the PPA provides is “additional.” Buying renewable electricity certificates from an existing, already-profitable wind farm is not.
Additionality matters because it is the difference between genuinely reducing emissions and simply relabelling existing clean energy. Companies reporting under frameworks like RE100 (a global initiative committing members to 100% renewable electricity) increasingly need to demonstrate that their procurement is driving new capacity. PPAs that directly enable the construction of new projects offer the strongest additionality claims.
🌿 Key Commercial Terms
Several terms come up repeatedly in PPA negotiations that are worth understanding:
- 🌿 Pay-as-produced – the most common structure in Ireland, where the buyer takes whatever the generator produces. This puts volume risk on the buyer (they might get more or less than expected) but is lower risk for the generator
- 🌿 Baseload or shaped – the generator commits to delivering a flat or shaped volume profile, taking on the volume risk if actual generation differs. This commands a premium because the generator must manage the variability
- 🌿 Fixed price vs. indexed – fixed-price PPAs lock in a set rate per MWh for the contract duration. Indexed contracts adjust the price annually based on inflation or another benchmark
- 🌿 Floor price – a minimum price below which the buyer does not pay. This protects the buyer during periods of negative wholesale pricing, which occurs periodically in the SEM
- 🌿 Guarantees of Origin (GoOs) – certificates proving the renewable source of electricity, essential for corporate sustainability reporting and emissions accounting
🌿 PPAs and the Irish Electricity Market
The Irish market has some distinctive features that affect PPA structures. The Electricity Regulation Act 1999 requires a supply licence to act as an intermediary between generators and consumers, which means private wire PPAs (where electricity is delivered directly without using the public grid) face high legal barriers and are not currently used in practice. This may change following reviews under the Climate Action Plan.
The SEM’s mandatory trading structure means that all generators must offer their output into the wholesale market. PPA settlements therefore happen alongside (not instead of) market participation. This adds complexity compared to markets where bilateral contracts can operate independently of the wholesale system.
Despite these structural constraints, the Irish PPA market has grown rapidly. The Government’s CPPA Roadmap, published in 2022, established seven core principles to ensure corporate power procurement contributes effectively to Ireland’s climate and renewable energy targets. SEAI was tasked with developing policy support for CPPAs, reflecting their importance alongside the RESS auction system.
🌿 PPAs for Homeowners?
Traditional PPAs are corporate instruments, but the underlying concept is relevant to households too. Ireland’s Clean Export Guarantee scheme allows households with solar panels to sell excess electricity back to the grid at a guaranteed rate – essentially a simplified, standardised PPA between a micro-generator and a licensed supplier.
Community energy projects also use PPA-like structures, where a local renewable energy cooperative generates power and sells it to community members at agreed rates. As Ireland’s energy system becomes more distributed, these models are likely to grow alongside traditional corporate PPAs.
🌿 Frequently Asked Questions
🌿 How much does a PPA cost compared to normal electricity?
PPA prices vary depending on the technology (wind or solar), contract length, volume and market conditions at the time of signing. In general, PPAs offer price certainty rather than necessarily the cheapest rate at any given moment. During the 2022 energy price spike, companies with existing PPAs locked in at lower rates saved significantly. In calmer markets, PPA prices may be slightly above spot rates – the premium buys stability and sustainability credentials.
🌿 Can small businesses sign a PPA in Ireland?
Yes, through multi-buyer or aggregated PPAs. A small business may not consume enough electricity to contract directly with a wind farm, but intermediaries like Flogas Enterprise bundle multiple smaller buyers together. This model has made PPAs accessible to businesses that previously had no route to direct renewable procurement. Companies like Ballygowan, Slane Irish Whiskey Distillery and Bon Secours hospitals have all signed PPAs through aggregated models.
🌿 What happens if the wind farm underperforms?
This depends on the contract structure. Under a pay-as-produced PPA, the buyer simply receives less electricity than anticipated and must source the shortfall from the market through their supplier. Under baseload or shaped contracts, the generator may face liquidated damages if output falls below agreed thresholds. These clauses are heavily negotiated and usually include carve-outs for grid-related issues and force majeure events.
🌿 Do PPAs count toward Ireland’s 80% renewable target?
Yes. PPAs directly support the 80% renewable electricity target by financing new renewable generation capacity. The Climate Action Plan specifically targets 15% of electricity demand to be delivered through corporate PPAs by 2030, recognising them as a critical mechanism alongside government-backed RESS auctions for building the wind and solar capacity Ireland needs.